Last night was the “foreign policy” presidential debate, which takes place in a magical fairyland with no connection to the real world.

The President’s signature foreign policy — drone strikes and targeted killing — received a brief mention and total agreement from Mitt Romney.

Both Obama and Romney “talked tough” on China, but failed to mention that a currency war with China would mean 20% inflation. But let’s ignore that, why not?

Both Obama and Romney said that they would stop Iran from developing nuclear weapons using diplomacy, but failed to mention what concessions the United States might make. After all, in negotiations, if one side gives something up, the other side has to give something up.

As bad as Romney was, Obama was almost as bad — dodging every question of substance (Iraq/Afghanistan draw-down, military funding, Syria, Libya) and pivoting to areas of strength.

Obama has always prided himself on treating the American people like adults. In the case of foreign policy, unfortunately, there is nothing but demagoguery, jingoism, and rah-rah over-the-top patriotism.

Is there any hope for the foreign policy debate? Goofy though they are, at least the domestic policy debates give some notion of the kind of economic policy the candidates espouse. The foreign policy debates are simply untethered from reality.

One solution might be the questions asked. Schieffer did all right, but consider what was not discussed. Our allies? Forget them. Free trade agreements? Never heard of ’em. Latin America? One platitude by Romney. India? Nonexistent. Japan? Only mentioned in a question about Israel. Although geopolitical hotspots are of great importance to us, America’s success in the next century will have more to do with our allies than our perceived enemies. Instead of just asking questions about how best to warmonger, we should be considering America’s full foreign policy when asking who will lead us.

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Ok, I know I’m not supposed to be cocky. And I am overall a rather pessimistic person, so I don’t even feel comfortable saying this, anyway. Plus, like everyone else, my political predictions frequently turn out to be wrong.

But, with Romney’s selection of Paul Ryan for VP, this election is now over. Obama will win, and fairly easily.

You may recall that in the past few weeks, there has been some uproar over Harry Reid’s claim that Romney paid zero taxes over the course of a decade. It’s a claim that could be easily disproved by Romney releasing his taxes, but of course he seems loath to do that.

But now the conversation has changed. Forget the past, let’s look at the future. Paul Ryan’s budget plan, which now becomes the Romney/Ryan budget plan, has some specific ideas for cutting taxes. In particular, it would slash corporate taxes to zero. For the one year of tax returns Romney has released, in 2010, Romney paid about 14% in taxes on his income. Under his new Romney/Ryan budget plan, that number would be… 0.82%. The reason? Nearly all of Romney’s income in that year comes from capital gains/dividends and the like.

This is unimaginably toxic. The political ads write themselves. Romney always had to fight against his image as a rich guy who just wants to cut taxes so that he becomes richer, while the middle class foots the bill. Now he picks a guy who has proposed to do exactly that.

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In the run-up to a general election, there are many, many stories of the day. I’m talking about the scandals, the moments of outrage, the ones that get all the blogs chatting. Do these matter? In one obvious sense, no. The only people who follow these are the insiders and political junkies (like me). Most voters don’t care, will never hear of these stories, and even if they did, the election is so far away from now that Grenell will be long forgotten, anyway.

But it still matters for another reason. It’s not the specifics of the story, per se, but what it tells about Mitt Romney and the Romney campaign. Consequently, what it tells us will inform future media coverage of his campaign, which I absolutely do believe has an impact.

So what was this story? Richard Grenell is a very conservative guy (he used to work with John Bolton) tapped by Romney as a spokesman for foreign policy. He also happens to be gay, and supports marriage equality. He resigned from his post just the other day. Why? The NYT reports:

It was the biggest moment yet for Mitt Romney’s foreign policy team: a conference call last Thursday, dialed into by dozens of news outlets from around the globe, to dissect and denounce President’s Obama record on national security.

But Richard Grenell, the political strategist who helped organize the call and was specifically hired to oversee such communications, was conspicuously absent, or so everyone thought.

It turned out he was at home in Los Angeles, listening in, but stone silent and seething. A few minutes earlier, a senior Romney aide had delivered an unexpected directive, according to several people involved in the call.

“Ric,” said Alex Wong, a policy aide, “the campaign has requested that you not speak on this call.” Mr. Wong added, “It’s best to lay low for now.”

For Mr. Grenell, the message was clear: he had become radioactive.

…

“It’s not that the campaign cared whether Ric Grenell was gay,” one Republican adviser said. “They believed this was a nonissue. But they didn’t want to confront the religious right.”

Grenell is a neoconservative tapped for a foreign policy position, and didn’t go off the script and talk about gay marriage. By all accounts, he is the guy the Romney campaign thought best for the job. But they nevertheless are so terrified of the conservative wing of their party that they muzzled him. No wonder he felt he had to resign. It just underscores the fact that there is no place in the Republican party for gays, and that Mitt Romney won’t stand up for what he believes when conservatives apply pressure to him.

That in turn brings up another point. I’ve heard people say things like, “Romney’s not as bad as Santorum, or Paul or Bachmann. He seems way more reasonable.” In politics, I don’t care what’s in a politician’s heart. I don’t care what they actually believe. I only care about what they do. And I wouldn’t trust Mitt Romney to govern differently than any Tea Partier.

I have decided to resign from the Romney campaign as the Foreign Policy and National Security Spokesman. While I welcomed the challenge to confront President Obama’s foreign policy failures and weak leadership on the world stage, my ability to speak clearly and forcefully on the issues has been greatly diminished by the hyper-partisan discussion of personal issues that sometimes comes from a presidential campaign.

As with other minorities, Republican outreach continues to be stifled by the bigotry that the party has stoked and exploited for years. A perfect attack dog, earnest in his hatred of Barack Obama’s foreign policy, Grenell should have been the right man for the job, but it was too much to ask for the Republican activist base.

Why can’t Marco Rubio get traction on his watered-down DREAM Act? Why did Colin Powell endorse Obama instead of his friend John McCain? Why do Latinos continue to leave the party in droves?

The Republican party has encouraged and condoned bigotry in order to create its current electoral coalition. Eventually, it will pay the price in human capital and long-term electoral success.

I am generally of the opinion that big money will not matter that much in determining the winners in American presidential politics. Because each party wins about half the time, we would expect rational people (and corporations, although I guess they are now people too) to support both parties; higher spending overall will not necessarily mean higher spending by one party relative to the other. Plus, because presidential politics rely on so many macro issues, and the candidates become very well known by the time the election comes around, the benefits of the extra marginal dollar become quite small.

And yet, I can’t ignore Mitt Romney’s ad blitz in Florida and its effectiveness. After reading the piece in the NYTimes this weekend following Romney’s campaign, you would think that the reason Romney is doing better in Florida is because his campaign told him to “unleash” his aggressive side and start attacking Gingrich. But actually, it just means he outspent Gingrich 5:1. We can look at isolated examples where the bigger money candidate lost (Boxer in CA, Kerry in 2004). But the asymmetry of the Florida election suggests that the age of superspending is just beginning and it will have consequences. It also suggests that because the Establishment can’t rally around a candidate in the way they used to (for fear of incurring Tea Party wrath), their circling of the wagons will just involve tens of millions of dollars.

OK, this will not be a full-throated defense. Instead, it’s more of a complication of the narrative being pushed by both Democrats and Romney’s Republican rivals. I hate to say that I’m agreeing with Michael Steele here, but I do agree that our moral qualms with Bain Capital and its business may end up implicating a lot of capitalism as a whole. (Unlike Steele, I don’t think this is entirely a bad thing, but let’s start here.)

Bain Capital, Romney’s company, has the M.O. of a lot of private equity firms: they invest in a variety of companies, lay off workers, slim down unprofitable assets, and groom them to be resold.

As with a lot of companies, if they can make more money elsewhere, they will. Capitalism is about making profits for individual companies, and we should expect companies to lay off workers if that makes the more profitable. Industries shift and costs fall elsewhere; that’s just the cost of capitalism. Each entity, acting in its own self-interest, makes decisions that impact the broader web of goods and services. Bain wasn’t playing the system, manipulating currency markets, or performing rent-seeking behaviors per se. Instead, it was just doing what one expects firms to do.

If we don’t like it, we can try to ameliorate these decisions: better education systems, better unemployment benefits, better job retraining, more government jobs to which to shuttle some of these excess workers, etc. We may also build a system that makes companies contribute more to the costs of terminating workers. But the core problem itself — that private equity firms buy up (often failing) businesses, lay off a bunch of workers, and make a profit off of it — is a core problem of capitalism, not just of Mitt Romney.